What are indices?

Stock indices give you a chance to trade an opinion of an economy without having to pick individual stocks. With unique benefits to both CFD trading and spread betting, indices are some of the most popular products to trade.

Market Index: A collection of stocks

Historically, investors needed a way to analyze the overall performance of the market. After all, you could never make a statement on the US economy by only looking at, say, Apple Inc.'s stock. This need begat the stock index, generally a collection of top-performing stocks grouped and averaged to give a quick glance at the market as a whole.

An index is a good way to look at particular markets, but for investors, it offers a way to gauge the performance of their individual portfolios, so underperforming specific investments can be adjusted to be more in line with the general trend of the market.

Indices can have a variety of variables. For starters, the number of stocks in any particular index can vary wildly, from a few dozen companies to thousands. The price of an index is found through weighing. Price-weighted indices are averaged based on the price of each component stock. Capitalization-weighted indices adjust the calculation based on the size of the companies included. Many other factors are represented depending on the stock index in question.

These days, there are hundreds of stock indices globally, representing companies nationally, regionally, globally, and even by industry.

Disclosure

Past Performance: Past Performance is not an indicator of future results.

Stock Index CFDs: trading on margin

Investing in stocks has a wide appeal globally, but the barrier to entry can often be high. Say you want to invest in an economy through an index to attempt to mirror the performance of that economy. You could simply buy shares in all the stocks on the index, but that could get costly, especially in light of broker's fees for transactions. Some turn to the futures market, trading the index through an ETF. The ETF is a fund that has shares in all the stocks in the index. With ETFs, you generally have 100% margin, meaning you have to put up the full value of the index to participate.

FXCM's index products, however, are traded as contracts for difference (CFDs). With CFDs, you have the advantage of trading on margin. You put up a fraction of the capital and still get the full value of the trade. But that's not the only benefit.

Trading indices as CFDs removes the barrier to trading. When you trade on the futures market, you have settlement periods. Short selling is typically impossible without a significant account balance. Plus the fees for each transaction are significant.

Index CFDs, on the other hand, have no settlement periods, short selling is as easy as buying, and you only pay the spread. With CFDs, you can scalp the market much more easily and you can enter the market with much less in your account.

How an index CFD trade works

Unlike forex, when you trade an index, you simply buy or sell based on your opinion of how that index will perform. With FXCM, you pay only the spread to open a trade. We do not impose stop restrictions for most of our products—you can easily scalp major indices. Plus, our smaller contract sizes means you can minimize your exposure in the market.

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Live Spreads Widget: Dynamic live spreads are available on Active Trader commission-based accounts. When static spreads are displayed, the figures are time-weighted averages derived from tradable prices at FXCM from October 1, 2018 to December 31, 2018. Spreads are variable and are subject to delay. The spread figures are for informational purposes only. FXCM is not liable for errors, omissions or delays, or for actions relying on this information.

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Disclosure

CME Group Market Data is used under license as a source of information for certain FXCM products. CME Group has no other connection to FXCM products and services as listed above and does not sponsor, endorse, recommend or promote any FXCM products or services. CME Group has no obligation or liability in connection with the FXCM products and services. CME Group does not guarantee the accuracy and/or the completeness of any market data licensed to FXCM and shall not have any liability for any errors, omissions, or interruptions therein. There are no third party beneficiaries of any agreements or arrangements between CME Group and FXCM.

Past Performance: Past Performance is not an indicator of future results.

Compensation: When executing customers' trades, FXCM can be compensated in several ways, which include, but are not limited to: spreads, charging fixed lot-based commissions at the open and close of a trade, adding a markup to the spreads it receives from its liquidity providers for certain account types, and adding a markup to rollover, etc.

Demo Account: Although demo accounts attempt to replicate real markets, they operate in a simulated market environment. As such, there are key differences that distinguish them from real accounts; including but not limited to, the lack of dependence on real-time market liquidity, a delay in pricing, and the availability of some products which may not be tradable on live accounts. The operational capabilities when executing orders in a demo environment may result in atypically, expedited transactions; lack of rejected orders; and/or the absence of slippage. There may be instances where margin requirements differ from those of live accounts as updates to demo accounts may not always coincide with those of real accounts.

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High Risk Investment Notice: Trading Forex/CFDs on margin carries a high level of risk and may not be suitable for all investors as you could sustain losses in excess of deposits. The products are intended for retail, professional and eligible counterparty clients. For clients who maintain account(s) with Forex Capital Markets Limited ("FXCM LTD"), retail clients could sustain a total loss of deposited funds but are not subject to subsequent payment obligations beyond the deposited funds and professional clients could sustain losses in excess of deposits. Prior to trading any products offered by FXCM LTD, inclusive of all EU branches, FXCM Australia Pty. Limited, FXCM South Africa (PTY) Ltd, any affiliates of aforementioned firms, or other firms within the FXCM group of companies [collectively the "FXCM Group"], carefully consider your financial situation and experience level. If you decide to trade products offered by FXCM Australia Pty. Limited ("FXCM AU") (AFSL 309763), you must read and understand the Financial Services Guide, Product Disclosure Statement, and Terms of Business. The FXCM Group may provide general commentary which is not intended as investment advice and must not be construed as such. Seek advice from a separate financial advisor. The FXCM Group assumes no liability for errors, inaccuracies or omissions; does not warrant the accuracy, completeness of information, text, graphics, links or other items contained within these materials. Read and understand the Terms and Conditions on the FXCM Group's websites prior to taking further action.

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76.88% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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